With investing, no decision is still a decision

THINKING about investing? Then appreciate that there is an advantage and a disadvantage in every investment decision you make.

For example, if you leave your money in the bank there will be no entry or exit fees, and you won't lose any of it if the share market falls. However, there is no chance of capital gain and no tax advantages.

If you contribute money to superannuation you are moving it to a low tax area -  the price you pay is loss of access until you reach your preservation age. This is 60 for anybody born after 1964.

Recently a reader wrote to tell me that he was 30 and was paying off a $20,000 car loan at 17.5% interest.

He had just negotiated a pay increase of $30,000 to reach an annual salary of $93,000, and wanted to know if it was better to hold off on salary sacrificing and use the extra income to clear the car loan faster.

Having a larger take home pay would also enable him to save a larger deposit to avoid high interest rates on a home loan.

I responded that I would much prefer that he leave any super contributions to his employer, and maximise his take home pay. 

On his tax bracket, salary sacrificed contributions lose just 15% while money taken in hand loses 38.5%.  The difference is not sufficient to justify locking up his money in super for at least 30 years. 

Also, a higher deposit means less mortgage insurance.